Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings, with Alphabet set to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue expectations for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as factors that will enhance sales. They expressed optimism about the growing AI features across Google’s platforms and believe the expanded use of AI Overviews will encourage greater engagement in the core Search business, despite initial issues with the tool leading to some online ridicule due to errors and inaccuracies. Consequently, they have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a striking 60% increase in profits during the first quarter, driven largely by its AI innovations. This financial success boosted the company’s stock price and raised its market capitalization above $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive performance in the first quarter came after multiple releases of new AI products as part of its Gemini AI suite, including a futuristic universal AI assistant showcased at the Google I/O developer conference. The company claims its latest Gemini AI is 20% faster than the newest iteration of ChatGPT.
Dan Ives from Wedbush was somewhat cautious regarding the potential of AI Overviews, suggesting they could contribute positively to Search monetization over time. However, he affirmed that AI is already enhancing Google Cloud services. Ives, along with other analysts, anticipates a 27% year-over-year growth in Cloud revenue for Google.
Doug Anmuth of J.P. Morgan echoed positive sentiments, listing Google among the firm’s favored tech stocks along with Uber and Amazon, citing encouraging developments in generative AI as Alphabet prepares for its second-quarter earnings announcement.
Despite the generally favorable outlook, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is optimistic, the long-term impact on Google’s sales remains uncertain.